Natural gas retreats from one-month high as cold outlook fades

Natural gas futures slid from a one- month high in New York after forecasts showed milder weather next week, crimping fuel demand.

Gas fell 0.6 percent after government midday models predicted normal to above-average temperatures for eastern and central states over the next six-to-10 days. Earlier forecasts had called for unusually cold weather. Gas also slipped after failing to push through technical resistance at $3.563, said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania.

“Apparently the Midwest snowstorm is moving east and its losing some of its intensity,” Schork said. “There wasn’t a smoking gun for why we took off this morning. There was a lot of pent up skepticism on the run-up. You are running out of winter.”

Natural gas for April delivery fell 2.2 cents to settle at $3.434 per million British thermal units on the New York Mercantile Exchange after rising to $3.554, the highest intraday price for a front-month contract since Jan. 24. Prices have climbed 2.8 percent this month, heading for the first gain since October. Trading volume was 21 percent above the 100-day average at 2:49 p.m.

April $4 calls were the most active gas options in electronic trading. They fell 0.2 cent to 0.6 cent per million Btu on volume of 1,810 contracts as of 3:41 p.m. Calls accounted for 52 percent of options volume.

Summer Spread

The discount for April contracts to October, a gauge of summer demand for gas, widened 0.5 cent to 21.4 cents after dropping to 19.9 cents, the least since Jan. 22. Over the past two weeks, the April futures have been trading at the smallest discount versus October contracts since 2004.

The relatively narrow spread may signal a slower start to the storage-injection season, which typically begins in April, in preparation for peak demand next winter, said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “Last year we were starting to threaten injections rather early and now the way the end of this winter has behaved doesn’t imply that is going to the case.”

Earlier, gas prices rose past the 100-day moving average at $3.463 on the outlook for a cold snap heading into March and an above-average inventory decline tomorrow.

The low temperature in Washington on March 6 may be 43 degrees Fahrenheit (6 Celsius), 8 above the usual reading, according to AccuWeather Inc. in State College, Pennsylvania. The low in Kansas City, Missouri, the next day may be 8 above normal at 41 degrees.

About 50 percent of U.S. households use gas for heating, according to the Energy Information Administration, the statistical division of the Energy Department.